What are your investment goals? Generating income, saving, planning for retirement, or maximizing your wealth?
This is a question that everyone should ask themselves, regardless of their age or net worth. Having a plan for your money and knowing what you hope to achieve with it is important. This class will discuss various investment goals and explain how you can reach them. We’ll also provide some tips on how to stay disciplined when investing. So, whether you’re just starting or investing for years, read on for helpful advice!
One common investment goal is to grow your money. This can be done through various methods, such as investing in stocks, mutual funds, or exchange-traded funds (ETFs). Another goal may be to generate income from your investments. This can be accomplished by investing in bonds or dividend-paying stocks. And finally, some people may seek to preserve their capital, especially when nearing retirement. This can be done by investing in low-risk assets such as government bonds or cash equivalents.
No matter what your investment goals are, it’s important to stay disciplined with your investing strategy. One way to do this is to set up a budget and invest only what you can afford to lose. It’s also important to have a diversified portfolio to avoid putting all your eggs in one basket. By diversifying, you can mitigate some of the risks involved with investing.
Table: Investment Goals, Returns & Risks
| Investment Goal | Investment | Estimated Return p.a. | Risk |
| Income | Dividend Investing | 2% | Low |
| Building Wealth | Growth Stock Investing | 7%-12% | Medium |
| Building Wealth | Real-estate | 7% | Medium |
| Saving Money | Index ETFs | 5% | Medium |
| Saving Money | Bonds | 1% | Low |
| Hedging Against Inflation | Gold, Silver, Commodities | 3% | Medium |
| Retirement | Balanced Portfolio | 7% | Low-Medium |
| Speculation | Trading | 10-15% | High |
“There are no sure and easy paths to riches on Wall Street or anywhere else”
Benjamin Graham – The intelligent investor
Investment Goal Examples
Generating income
There are many ways to generate income through investing. One way is to purchase stocks or mutual funds that pay dividends. Dividends are payments made by a company to its shareholders, usually quarterly or annually. Another way is to invest in bonds. Bonds are loans that investors make to entities such as corporations or governments.
Building wealth
Building wealth through investing is all about finding the right balance of risk and reward. While there are no guarantees in investing, diversifying your portfolio across a mix of asset classes and investment vehicles can help reduce your overall risk while providing the potential for higher returns. For example, you might consider investing in stocks, mutual funds, real estate, and other assets.
The S&P500 has averaged an 11% profit per year over the last 20 years. So, you should not expect more than 11% from your stock investing.
Saving money
Investing is one of the most effective ways to save money. When you invest, you are essentially putting your money into something that has the potential to grow over time. This can be a great way to reach your long-term financial goals. You can choose from various investment vehicles, such as bonds, mutual funds, and real estate. Finding the right mix of investments for your portfolio will depend on your financial goals and risk tolerance.
Hedging against inflation
One way to hedge against inflation is to invest in assets that have the potential to maintain or increase in value over time. This can include stocks, bonds, real estate, and other assets. Another way to hedge against inflation is to invest in commodities like gold or silver. These commodities have a history of maintaining their value during periods of inflation.
Investing for retirement
Retirement planning is all about finding the right balance of risk and reward. While there are no guarantees in investing, diversifying your portfolio across a mix of asset classes and investment vehicles can help reduce your overall risk while providing the potential for higher returns. For example, you might consider investing in stocks, bonds, mutual funds, real estate, and other assets.
Speculating on future asset prices
When you speculate on the future price of an asset, you are essentially making a bet on where the market will go. This can be risky, but if you do your homework and understand the risks involved, it can also be a great way to make money. There are various ways to speculate on the future price of an asset, such as buying stocks, futures contracts, or options. Finding the right strategy for you will depend on your risk tolerance and investment goals.
These are only a few examples, but investors may have many other goals. The important thing is to align your investment strategy with your goals so that you can make the most of your money.
So, what is the realistic maximum? What do the best of the best achieve?
How much can you make in the stock market?
Warren Buffett is a self-made billionaire who made it all from company stock investments. Buffett’s annual compound rate of return is 24.7%. George Soros is a self-made billionaire who makes an annual compound rate of return of 28.6%
So it would seem over the long term, if you can achieve a rate of return close to 25%, you are doing extremely well. You are among the best of the best.
Summary
As you surf the web, you will be accosted by certain “Get Rich Quick” schemes, offering you amazing rates of return on your money. Typically, these take the form of Hot Stocks Newsletters, Special Trading Systems, Personal “Rags to Riches” stories to touch your emotions, “and for only $50 per month, you too can learn to secret to unparalleled wealth”.
Do not believe the hype. Do not expect more than 25% per year, at the very most. If they are so successful, ask these people why they are not on the Forbes Rich List.
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